No Enhanced Federal Funds For Partial Medicaid Expansion

Last week, 11 governors – including those in Ohio, Arizona, Louisiana, Florida, Virginia, Iowa, Maine, Mississippi, South Dakota, Utah, and Wyoming – submitted a letter to Health and Human Services Secretary Kathleen Sebelius asking whether states that expand Medicaid eligibility to a level less than that included in the Affordable Care Act (ACA) are eligible to receive the enhanced federal funding that goes along with the ACA expansion. On Monday, Secretary Sebelius told these governors that there will be no enhanced match for a partial Medicaid expansion.

Under the ACA, states are required to expand their Medicaid programs to cover many individuals earning incomes up to 138% of the Federal Poverty Level (FPL), or about $31,809 for a family of four. States that expand their Medicaid programs to include individuals earning up to 138% of the FPL will receive enhanced federal reimbursement for this population – 100% initially, eventually moving down to 90%. The regular federal match rate for Medicaid varies by state from 50% to 78%.

This summer’s decision by the United States Supreme Court, however, made the Medicaid expansion optional. Following the decision, states began to explore the idea of expanding their Medicaid programs to cover uninsured individuals earning incomes less than 138% of the FPL; for example, up to 100% of the FPL.

Under the ACA, individuals earning between 100% of the FPL ($20,050 for a family of four) and 400% of the FPL ($80,200 for a family of four) will be eligible for federal subsidies to purchase health insurance in the Health Insurance Exchange. So some states advocated for expanding Medicaid eligibility up to 100% of the FPL (instead of 138%) in order to cover many currently uninsured individuals, and allowing individuals earning between 100% and 400% of the FPL to purchase health insurance in the Exchange, receiving federal financial assistance to do so.

On Monday, however, Secretary Sebelius made clear that states are not eligible for the enhanced federal funding unless they expand Medicaid eligibility up to 138% of the FPL. Now that states have this guidance from the federal government, they can continue to understand the financial viability of the decision to expand Medicaid.

Policy experts have expressed differing views as to whether the ACA allows states to expand Medicaid to a threshold less than 138% of the FPL. One interpretation is that the expansion population constitutes a coverage group that must be treated as a whole. Another interpretation is that, in light of the Supreme Court’s determination that the expansion is optional, states can choose to cover all or part of the expansion population. Questions regarding whether a state can seek a waiver to cover part of the expansion group remain.

Vorys Health Care Advisors

Ideas. Strategies. Solutions. Action. With a unique combination of Medicaid, public policy, financial and clinical experience, our health care and Medicaid consultants help stakeholders meet the challenges of a complex, rapidly changing state and federal health care environment. We offer clients innovative strategies and the kind of counsel that leads to well-informed decisions — and action that gets results.